🥛 Oracle lost $100B in one day 💸

GM. This is Milk Road AI, covering the AI boom, the capital behind it, and the fine print investors can’t ignore.

Here’s what we got for you today:

✍️ Is Oracle betting $250B on an AI boom that might not last?
🎙️ The Milk Road AI Show: The AI Trade Isn’t Over: Why We’re Only in Year 3 of a 10-Year Buildout w/ Dan Ives
🍪 OpenAI accelerates the AI image war with GPT Image 1.5

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Prices as of 10:00 AM ET.

ORACLE’S EARNINGS LOOKED FINE, UNTIL THIS NUMBER APPEARED

What’s red and falls faster than a skydiver who forgot his parachute?

Hint: your portfolio may have felt it.

Alright, fine, I’ll stop the suspense. It’s Oracle’s stock price.

It’s been about a week since Oracle’s earnings report, and the dust still hasn’t settled.

What followed was a one-day selloff that erased roughly $100 billion in Oracle’s market cap.

Source: Business Insider

Oracle shares puked nearly 15% in a day and it's the worst drop since the dot-com bust, back when Justin Timberlake had ramen-noodle hair.

Now, usually when a company loses the GDP of a small country in one trading session, it’s because the business is on fire (and not in a good way).

But if you ask Oracle, everything is fine. In fact, they beat earnings expectations!

Source: Tenor

But then why is Wall Street acting like the sky is falling?

Because investors finally opened up the hood of Larry Ellison’s shiny new AI racecar and found inside:

The gas tank is empty, the engine is on fire, and Larry just put the pedal to the metal.

Let’s dive into the most expensive drama on Wall Street and trust me, you’re going to want the entire story.

Wait, what does Oracle actually do?

Before we get to the explosions, let’s address the elephant in the room.

You see the logo at airports and on Formula 1 cars, but ask 10 random people what Oracle actually does and nine will stare at you like you just asked them to explain the tax code.

Source: Hexagon

To understand why this stock crash matters, you have to understand that Oracle is really two different companies glued together with duct tape and debt.

First, you have the “Old Oracle”.

This is the company that quietly runs the plumbing of the global economy.

Oracle’s databases and enterprise software power everything from payroll and accounting to supply chains and customer data at banks, hospitals, governments, and Fortune 500 companies.

It’s mission-critical, painfully boring, insanely sticky, and it prints cash.

But it’s also a dinosaur.

Software revenue declined 3% this quarter, because selling licenses to massive enterprises isn’t exactly the hottest growth story in 2025.

Then there’s the “New Oracle”.

This is where Larry Ellison decided to become a landlord for the internet.

Oracle is now building massive cloud data centers, stuffing them with GPUs, and renting out AI supercomputers to anyone desperate enough to need them (OpenAI has entered the chat).

Source: Fortune

That’s where the story shifts from boring cash machine to high-stakes gamble.

The market loves old Oracle because it makes money.

The market loved new Oracle too, until the fine print started screaming.

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ORACLE’S EARNINGS LOOKED FINE, UNTIL THIS NUMBER APPEARED (P2)

The screaming became impossible to ignore during earnings.

Oracle reported a headline beat of $2.26 per share, which technically counts, if you ignore that it was sweetened by a $2.7 billion one-time gain from selling its stake in a chip startup called Ampere.

Source: The Register

In other words, Larry found a wad of cash in his winter coat, counted it as earnings, and hoped nobody would notice that the core business actually missed revenue estimates.

Spoiler: the market noticed.

But the real bombshell wasn't even on the earnings call. It was buried in a boring 10-Q filing released the next day.

Oracle disclosed a staggering $248 Billion in future lease commitments for data centers.

Source: Bloomberg

Here is the killer stat that has risk managers hyperventilating:

Oracle is signing 15 to 19-year leases on these buildings, but their biggest customers (like OpenAI) are typically signing contracts for only 5 years.

Imagine signing a 20-year lease on a mansion because a rich tenant promised to stay for 5 years.

If that tenant leaves in Year 6, or if the AI hype train slows down, you are stuck with the bill.

If Oracle miscalculates demand, they are on the hook for a quarter-trillion dollars of rent for empty buildings.

Then there is the spending. Oracle announced they are raising their spending guidance by 15 billion to $50 BILLION next year.

Source: @ArpitAgar_Aurum

To put that in perspective, the company is free cash flow negative, reporting roughly –$13B over the past 12 months.

Think of "Cash Flow" as your salary, and "Free Cash Flow" as what's left after you build a mansion.

Oracle has a great job but they just have a massive spending problem.

Source: @EconomyApp

They’re spending like Amazon and Google but with a bank account that very much does not look like Amazon or Google’s.

Barclays analyst Andrew Keches ran the numbers and came to a simple conclusion: at this burn rate, Oracle literally runs out of cash by November 2026

The bet that defines Oracle

Every major technological shift has this moment, when incumbents either overreact or don’t react nearly enough.

Blockbuster laughed at Netflix when streaming looked small, unprofitable, and inefficient. We all know how that story ended.

Oracle is staring at a similar fork in the road.

Standing still is safe today, but potentially fatal tomorrow.

So Larry Ellison is choosing the risky path: Spend aggressively, build ahead of demand, and bet that the world grows into the infrastructure.

Before you short the stock and sell your house though, you have to look at the other side.

While the bears are obsessing over the bill, the bulls are staring at the speedometer.

The growth is actually undeniable.

Oracle Cloud Infrastructure (OCI) revenue accelerated to 68% this quarter with revenue of $4.1 billion in Q2.

Source: @Beth_Kindig

Total cloud revenue climbed to $8.0 billion, with growth accelerating from 28% to 34%.

While AWS and Azure are jogging, Oracle is sprinting awkwardly, expensively, but undeniably fast.

And that “demand problem” bears keep warning us about? It doesn’t exist yet.

Oracle’s backlog exploded to $523 billion, roughly eight times its annual revenue.

Source: @danielisdizzy

That is roughly 8x their annual revenue.

That’s half a trillion dollars of IOUs from people like Mark Zuckerberg and Sam Altman.

Oracle is growing faster than ever in the cloud, but it is now all-in on the AI boom

The stock is down about 35%, from $300 to roughly $190, as investors debate whether this is genius or financial brinkmanship.

The bottleneck has shifted from selling to building.

If the AI cycle holds (and we think it will), Oracle becomes the fourth hyperscaler and prints money for a decade.

If it turns, Oracle is left with massive debt, long leases, and a lot of very quiet server racks.

Alright, that’s it for this edition of Milk Road AI, but we’d love to know your thoughts:

Are you buying, holding, or selling ORCL after this quarter? Reply to this email with…

Buy
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YEAR 3 OF A 10-YEAR SUPER-CYCLE 🚀

In today’s episode, we sat down with Dan Ives, Wall Street tech analyst at Wedbush, to talk about why the AI trade is far from over.

Take a look at what surprised us:

Why we’re in a “1995 moment” for AI, not 1999
Only 3% of U.S. enterprises are using AI in a meaningful way
The power grid and chip shortages are real constraints, and why that matters
How Tesla, Nvidia, and nuclear energy all fit into the next decade of AI growth

Click play and get the full picture 👇

YouTube | Spotify | Apple Podcasts

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